February 2026 – Pavestones Legal

Entering Nigeria’s Venture Capital Market: Regulatory Clarity, Capital Thresholds, and Structuring Pathways for Investors

February 27, 2026/in Pavestones Newsletters /by Pavestones Legal

By Aderonke Alex-Adedipe and Mark Imonitie

Introduction

Nigeria’s venture capital (VC) sector has evolved from an informal, relationship-based market into a structured ecosystem shaped by various laws and regulatory requirements including regulations provided by the Securities and Exchange Commission (SEC).

As local and international VCs provide capital to high-growth businesses, VC firms must adeptly navigate Nigeria’s dynamic regulatory landscape which governs capital raising, fund structuring, portfolio management, and exits.

In this newsletter, we examine some key aspects of the SEC regulations for VC firms in Nigeria, highlighting recent registration and compliance amendments essential to the operations of VC firms amid evolving capital requirements.

SEC’s Registration Requirements

The SEC registration threshold for full registration of VC funds was raised from ₦1 billion to ₦5 billion in April, 2025. Consequently, while VCs with a target fund size of ₦5 billion or less are exempt from full registration, they are required to file governing documents and obtain a “no objection” certificate from the SEC.

Additionally, the SEC’s 2025 Ease of Doing Business guide mandates smaller funds to provide a notarized compliance checklist duly executed by the boards of both the fund manager and sponsor, containing various details including, the investment policy and objectives of the funds, profile of the Fund Manager and its experience, material risks of investing in the fund, duration of the fund and provisions for extension of the fund.

By reducing the registration threshold, the SEC aims to reduce the regulatory burden on smaller funds.

For funds above the ₦5 billion threshold, the documentation requirements include the information memorandum, partnership agreements amongst many others.

Minimum Capital Updates

The SEC in its circular of January 16 2026, raised the minimum share capital for VC fund managers from twenty million naira (N20,000,000) to two hundred million naira (N200,000,000). Existing fund managers of VCs, are required to increase their share capital to meet the minimum requirement of N200,000,000 on or before June 30, 2027.

The primary goal of the increase in the capital requirement is to enhance market stability, protect investors, and align regulations with global standards by ensuring that only VC managers with sufficient capital to handle operational risks are licensed to operate, thereby deterring unqualified entrants.

Practical Compliance Touchpoints for VC Firms

In practice, VC firms in Nigeria need to navigate both fund‑level regulation and deal‑level compliance. Some practical touchpoints include:

Fund formation: VC firms are advised to critically select an appropriate vehicle (Limited Partnership, Limited Liability Partnership or company), and ensure that its agreements are robust and align with SEC rules on the operations of VC funds.
Licensing and filings: VC firms are required to determine whether the manager or adviser requires SEC registration, whether the fund must register or only submit documents for “no‑objection”. They are also required to keep up with exposure drafts and guidance notes released by the SEC from time to time, in respect of their operations.
Investor protection and disclosures: VC firms are to ensure that they adhere to valuation policies, fee and expense disclosures, and conflict‑of‑interest management in their operations.
Exit planning: In exit planning, VC investors must carefully consider initial public offerings, secondary sales, or buybacks within Nigeria’s corporate, securities, and tax frameworks, alongside exchange control regulations applicable to foreign investors, to secure optimal returns on their investments.

Conclusion

The recent amendments to the SEC rules and regulatory framework for venture capital firms mark a coming‑of‑age moment for Nigeria’s VC ecosystem, signaling a more mature, transparent and investor‑friendly environment for capital formation. For VC firms, smart legal and regulatory planning is no longer just a compliance chore, it has become a strategic edge that builds trust and unlocks opportunities.

Foreign Exchange Controls in Nigeria: Updated Rules for BDCs

February 20, 2026/in Pavestones Newsletters /by Pavestones Legal

BY SEUN TIMI-KOLEOLU AND PROMISE ITAH

Introduction

On February 10, 2026, the Central Bank of Nigeria (CBN) issued a circular on Participation of Licenced Bureau De Change in the Nigerian Foreign Exchange Market (NFEM) (the “Circular”) allowing licensed Bureau de Change (BDC) to operate as intermediaries in the NFEM (the official foreign exchange market). This represents a significant policy shift, as BDCs had been excluded from accessing foreign exchange (FX) through official channels since July 2021 due to practices deemed to have contributed to exchange rate instability.

The Circular builds on the 2024 regulatory reforms, which strengthened capital requirements, licensing standards, reporting obligations, and compliance expectations for BDCs. According to CBN, the decision to re-admit BDCs aims to improve FX liquidity and ensure that legitimate end users can access foreign exchange more reliably.

In this newsletter, we highlight the key rules for BDC participation in the foreign exchange market and their practical implications.

What Are the New Rules for BDC Participation?

Under the Circular, licensed BDCs may participate in the NFEM, subject to the following requirements.

a. Weekly FX Purchase Limit: To manage liquidity and prevent excessive exposure, each licensed BDC may purchase up to $150,000 per week from any authorized-dealer bank. All purchases must be conducted at the prevailing market rate, with no preferential pricing arrangements.

b. Mandatory Resale Timeline and Position Restrictions (NFEM-Sourced FX): Any FX acquired under this scheme must be sold or used within 24 hours. BDCs cannot hold NFEM-sourced FX in their accounts beyond this period, and any unused balances must be returned to the market the next day. This rule prevents speculative hoarding and ensures that FX flows efficiently to end-users.

c. Settlement and Payment Structure: All FX transactions must be processed through bank accounts at licensed financial institutions. BDCs cannot route FX through third parties or non-customer intermediaries. Cash settlement is permitted, but it is strictly limited to no more than 25% of the transaction value, with the remainder required to pass through the banking system. This ensures that FX flows are traceable and transparent.

d. Compliance and Regulatory Oversight: In addition to operational limits, BDCs remain subject to enhanced compliance obligations:

i. Authorised dealers must perform full Know Your Customer (KYC) and due diligence on any BDC client before selling FX.

ii. Licensed BDCs are required to submit timely electronic reports of their transactions to the CBN and comply fully with all Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) rules.

iii. Anonymous transactions or round-tripping (buying FX at official rates and reselling it elsewhere for profit rather than for legitimate use) are strictly prohibited.

The Circular further reinforces that BDCs must operate within the broader Regulatory and Supervisory Guidelines for Bureau de Change Operations in Nigeria 2024.

What Are the Practical Implications?

a. For BDC operators:

i. Immediate Turnaround: BDCs must find buyers immediately or face the administrative burden of selling funds back to the NFEM within 24 hours;

ii. Strategic Forecasting: To avoid the inconvenience and potential losses involved in returning unused funds, BDCs must accurately forecast customer demand before purchasing their weekly $150,000 limit;

iii. Digital Accountability: The new framework emphasizes a “digital footprint,” requiring BDCs to integrate their IT systems with the CBN for real-time monitoring and reporting.

b. For the market and the public:

i. Easier access: The participation of BDCs in the official exchange market is expected to make it easier for the average person (travelers, students etc.) to obtain FX. Since BDCs are widely accessible to these users and are required to sell NFEM-sourced FX within 24 hours, supply of FX is expected to circulate more quickly to end users.

ii. Price stability: By prohibiting the hoarding of FX, the rules are expected to help reduce the extreme price jumps often seen in the parallel market.

Conclusion

The reintegration of licensed BDCs into Nigeria’s FX market provides a transparent and reliable channel for accessing foreign exchange. For businesses, it is likely to enhance predictability and reduce reliance on informal sources, while for BDCs, it reinforces the need to operate strictly within the established regulatory framework. The CBN expects that, when properly implemented, this structure will promote smoother FX flows, support effective business planning, and contribute to overall market stability.

For further information on any of the issues covered in this newsletter, please contact us at info@pavestoneslegal.com. At Pavestones, we deliver quality and innovative legal support across diverse industries, helping businesses operate in compliance with applicable laws and regulations to drive sustainable business growth.

THE 2026 CBN FINTECH REPORT; DEFINING THE FUTURE OF FINTECH IN NIGERIA

February 13, 2026/in Pavestones Newsletters /by Pavestones Legal

BY ADERONKE ALEX-ADEDIPE AND ENIOLA SOGBESAN

Introduction

The publication of the Fintech Report (the “Report”) by the Central Bank of Nigeria on February 2, 2026 represents a significant milestone in Nigeria’s fintech regulatory landscape. It is the first sector-wide review after the release of the Payment Systems Vision 2025 in 2022. The Report signifies a shift towards more coordinated regulation, simplified licensing processes and deeper institutional engagement with the fintech ecosystem. In summary, the Report reinforces CBN’s intention to balance innovation with stability of the financial system and market confidence.

Key Report Insights

Based on engagement with the fintech ecosystem, the Report identified several key challenges that will guide policy development and regulatory priorities going forward. These include:

Persistent infrastructure gaps
Increased regulatory compliance costs
Longer time-to-market due to compliance bottlenecks
Increased use of artificial intelligence in driving real-time payments
Split perception of regulatory framework(s).

Based on the key insights obtained from engagement with the fintech ecosystem, the Report identified three (3) top-level objectives that will guide Nigeria’s fintech policy framework –

Enable innovation-friendly regulation
Advance financial inclusion through digital infrastructure
Strengthen system integrity and reputation

These objectives will serve as the foundation of the proposed CBN reforms for the fintech ecosystem. These reforms are timely, given that notwithstanding the sustained expansion of Nigeria’s fintech ecosystem, operators continue to grapple with practical regulatory challenges—ranging from unclear compliance obligations, extended approval timelines, limited inter-agency coordination and a lack of clear oversight of emerging areas.

Policy Priority Initiatives

Following stakeholder feedback and guided by the three (3) top-level objectives, the Report outlines ten (10) priority areas that will guide CBN policy formulation for the ecosystem. These priority areas are –

Launch a Standing Fintech Engagement Forum – This forum will serve as a dedicated, institutionalized platform for engagement between regulators and operators. To complement this forum, the CBN will support the establishment of a Self-Regulatory Organisation (SRO) within the fintech ecosystem, building on the progress of existing bodies, like FintechNGR.

Operationalize a Single Regulatory Window – Establish a digital portal to coordinate licensing and supervisory processes across regulatory bodies. While the Report recognizes that a fully integrated system might be ambitious, this step would help streamline compliance frameworks and improve time-to-market timelines for regulated entities.

Expand Regulatory Sandbox and Innovation Pilots – The expansion of the regulatory sandbox to support experimentation in emerging areas like artificial intelligence, cross-border payments etc. This will also include the expansion of the sandbox to a broader range of institutions such as MFB’s, PSBs, and Telco’s in pilot schemes.

Creation of an Industry-Government Digital Trust Charter – The Charter will serve as a shared framework between regulators and service providers. It will define areas such as responsible innovation, data governance, cybersecurity standards and consumer protection. The Charter may take the form of a voluntary code of conduct or may be embedded within licensing frameworks.

Expansion of Digital Banking Licenses to Support Inclusive Financial Services – The CBN will assess how a dedicated digital banking framework could enable new market entrants to safely offer credit and savings services, subject to appropriate safeguards. To avoid conflicts with existing PSBs and MFB’s frameworks, the framework could create a consolidated digital banking license, rather than introducing an entirely new license category.

Accelerate Open Banking Implementation -The Report emphasizes the timely rollout of Nigeria’s open banking protocols, including technical standards, governance structures, and dispute resolution mechanisms.

Expansion of access to Digital Identity Infrastructure – Under this initiative, the CBN will work with relevant authorities to reduce barriers to affordable, API-based digital identity verification for regulated entities. This is designed to reduce onboarding friction and support more inclusive access to credit and other services.

Strengthen Data Sharing and Credit Infrastructure – The CBN will review data-sharing rules and pricing models to support interoperability and reduce the cost of access to credit reference systems for fintechs and non-bank financial institutions.

Advance Regional Regulatory Harmonization – The Report encourages CBN to engage with regional central banks and economic blocs such as ECOWAS to pilot the mutual recognition of licenses or establish regional sandbox programs.

Position Nigeria as a Hub for Responsible AI in Finance – The Report further encourages the CBN to adopt a ‘test-then-codify’ approach, where learnings from the regulatory sandbox are converted into formal rulebooks / regulations.

Actionable Framework

To implement these policy priorities, the Report proposed the development of the following frameworks/digital portals:

Regulatory Engagement Platform (REP)
Smart Licensing and Supervisory Gateway (SLSG)
Open Finance Lab (OFL)
Fintech Trust and Safety Charter (FTSC)
Fintech Credit Guarantee Window (FCGW)

Implementation

As set out in the Report, the proposed policy reforms are to be implemented in phases as follows:

Phase 1: Immediate Priorities (0–3 months)

Establish Fintech Engagement Forum under CBN leadership.
Issue implementation roadmap for Open Banking and initiate industry sensitization.
Begin technical scoping for Single Regulatory Window and Smart Licensing Gateway.
Coordinate cross-agency review of PSB lending restrictions and digital ID access

Phase 2: Near-Term Reforms (3–9 months)

Launch pilot cohort for Regulatory Sandbox 2.0 including AI and RegTech use cases.

Operationalize Fintech Credit Guarantee Window in collaboration with DFIs.

Issue guidance on data portability and consumer protection under Open Finance.

Initiate bilateral consultations on regulatory passporting (Ghana, Kenya, Senegal).

Phase 3: Institutionalization and Scale (9–18 months)

Formalise Fintech Advisory Council to oversee implementation and course correction.
Launch Regulatory Engagement Platform and public calendar of consultations.
Embed supervisory analytics and early-warning tools through SupTech pilots.
Participate in ECOWAS and AU regulatory alignment fora to shape continental norms.

Conclusion

With the Report indicating a shift towards a more organized and collaborative regulatory regime, these proposed reforms are designed to achieve the overarching top-level objectives of the CBN. However, the effective implementation of the proposed reforms will rely on the sustained engagement between regulators and the fintech ecosystem, strengthened supervisory capacity and effective alignment with regional and development partners.

For fintech service providers, the immediate priority is to gradually align internal operational frameworks with anticipated regulatory tools particularly around licensing, supervisory reporting, digital identity, and cross-border operations. If implemented correctly, these reforms will consolidate Nigeria’s position in the fintech ecosystem as a continental pacesetter while balancing innovation with systemic integrity and regulatory compliance.

THE NIGERIA CARBON MARKET FRAMEWORK 2025: AN OVERVIEW

February 6, 2026/in Pavestones Newsletters /by Pavestones Legal

BY SEUN TIMI-KOLEOLU AND HILLARY OKOROTIE

Introduction

In 2025, Nigeria took a significant step in advancing its climate action agenda with the signing of the Nigeria Carbon Market Framework (the “Framework”). Recently on January 14, 2026, the Framework was officially approved at the Abu Dhabi Sustainability Week. The Framework sets the foundation for Nigeria’s participation in global and domestic carbon markets and provides a clear regulatory framework structure for the engagement in carbon trading within Nigeria.

The Framework guides the development, governance, and operationalization of carbon market activities in Nigeria. It provides a structured pathway for Nigeria’s participation in both international and domestic carbon markets, in line with the Climate Change Act 2021 and Article 6 of the Paris Agreement. At its core, the Framework establishes the institutional, regulatory, and market architecture required to support the authorization, trading, investment and oversight of carbon market in Nigeria. It sets out Nigeria’s approach to engaging with voluntary carbon markets, international cooperative mechanisms, and future carbon pricing instruments.

In this newsletter, we will be providing an overview of some of the objectives of the Framework.

Alignment with Global Climate Commitments

This Framework is aligned with Nigeria’s international climate obligations, particularly its commitments under the Paris Agreement and its Nationally Determined Contributions (NDCs) which outlines the country’s action plan towards the reduction of greenhouse gas emissions. NDC targets an economy-wide carbon emissions reduction by 2035. In this regard, the Framework identifies priority mitigation sectors, including energy (covering electricity generation and the oil and gas sector), transport, waste and wastewater management, industrial processes and product use, as well as agriculture, forestry, and other land use.

The NDCs are intended to serve as implementation instruments that translate Nigeria’s climate commitments into measurable and verifiable actions across these priority sectors. In operationalizing Nigeria’s NDCs, the Framework supports the country’s transition from its current emissions trajectory to an economy-wide, absolute emissions reduction pathway.

Facilitation of a Voluntary Carbon Market

One of the objectives of the Framework is to facilitate the development of a voluntary carbon market as a pathway to unlocking Nigeria’s carbon credit potential. In this regard, Nigeria seeks to establish a system that enables private individuals, entities, and other relevant stakeholders to trade in carbon credits outside the regulatory framework of mandatory carbon pricing instruments. However, in facilitating trade in the voluntary carbon market, stakeholders intending to participate will be required to adhere to recognized international standards. These include the Verified Carbon Standard (VCS), Gold Standard, and the Climate, Community & Biodiversity (CCB) Standards. Participants must also comply with applicable local laws and regulations, including conducting the necessary Environmental Impact Assessments (EIAs) required for environmental projects, among other regulatory obligations. In addition, participants are expected to adhere to industry best practices, with the objective of reducing greenhouse gas emissions and delivering positive social and environmental impacts on host communities.

Strengthening Climate Regulatory Governance

For the purpose of strengthening climate governance in Nigeria, the Framework provides for a Carbon Market Activation Policy. The objectives of this policy include the establishment of guidelines and procedures to enhance initiatives aimed at reducing Nigeria’s greenhouse gas emissions while simultaneously promoting sustainable development. Along with the Carbon Market Activation Policy, the Climate Change Act provides for the development of Carbon Market Regulations(the “Regulations”). While the Regulations are yet to be enancted, they are designed to govern the carbon market and provide flexibility for carbon-related transactions. The Regulations will define the market mechanisms to be adopted by the Government for promoting and engaging in the voluntary carbon market. It will also set out rules for carbon project development, clarify the regulatory institutions responsible for the administration and oversight of the carbon market, and provide a framework for the implementation of Nigeria’s obligations under the Paris Agreement, among other provisions.

Conclusion

The Framework marks a pivotal moment in Nigeria’s climate governance journey. By providing a coherent policy and regulatory foundation for carbon market participation, the Framework emphasis Nigeria’s readiness to engage competitively in global carbon markets. If successfully implemented, the Framework has the potential to position the country as a leading carbon market hub in Africa.

To read more on Nigeria’s Carbon Market, please see our newsletters below.

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